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November 2023 Tax Investigation Round Up

November's round up of the latest tax investigation news and cases:

  • £2.2m bank contractor fraud
  • 6-year ban for energy boss
  • Build jailed for £600k fraud
  • £138k Eat Out to Help Out fraud

£2.2m bank contractor fraud

A resident of Hertfordshire has been sentenced to four years in jail for committing a £2.2 million fraud during his employment at the Royal Bank of Scotland.

Michael Grant, aged 45, formerly worked as a senior market data administrator and financial analyst for the bank. He pleaded guilty to fraud by abuse of position under the Fraud Act 2006 at the Inner London Crown Court. Grant redirected refunds from service providers, intended for the bank, into his personal external business account. The fraud involved 100 refund payments totaling £2,260,729.09.

The Dedicated Card and Payment Crime Unit (DCPCU), a specialized police unit funded by the banking and finance industry, conducted an investigation that led to Grant's prosecution. Grant's fraudulent activities were discovered when a document, apparently altered, was found on a printer in his office, falsely indicating that his business account was affiliated with the bank.

Upon suspicion, the bank conducted an interview with Grant, leading to the termination of his contract due to the perceived risk he posed to the organization. Subsequently, both the bank and the DCPCU initiated a comprehensive investigation to determine the full extent of Grant's fraudulent actions.

Detective Inspector Kate Duff from the DCPCU commented on the case, stating, "Michael Grant acted with dishonesty and abused the position of trust that his employer had given him. The extent of the losses show he only acted in the interest of himself, without any regard for the detrimental ramifications of the bank, his employer."

Duff further emphasized the collaborative effort between the DCPCU and the banking and finance industry in bringing Grant to justice. She concluded, "This sentence should serve as a warning to perpetrators of crime that they will be caught and brought to justice."

6-year ban for energy boss

The former director of Extra Energy Supply, Mordechay Maurice Ben-Moshe, aged 48, has been barred from running a business after the company went bankrupt, owing £28.5 million to Ofgem for feed-in tariffs.

Ben-Moshe served as a director for Birmingham-based Extra Energy Supply Ltd, which went into administration in December 2018, leaving approximately 130,000 household and business customers without service. At the time of its collapse, the company was under investigation by Ofgem for alleged breaches of regulations. Ofgem raised concerns about customers receiving substantial bills, delayed issuance of quarterly and final bills, and the untimely handling of customer complaints.

Additionally, Extra Energy Supply owed £28.5 million to Ofgem's renewables obligation and feed-in tariff schemes, aimed at promoting renewable electricity generation and use. The company failed to meet these obligations. Despite going into administration before Ofgem could conclude its investigation, subsequent findings by the Insolvency Service, in collaboration with Ofgem, revealed that Ben-Moshe had breached his directorial duty by failing to ensure regulatory compliance.

Disqualification proceedings were initiated against Ben-Moshe by the Insolvency Service in December 2021, with a trial scheduled for November 2023. However, prior to the trial, Ben-Moshe opted for a disqualification undertaking, equivalent to a disqualification order but without court proceedings.

The latest progress report by administrators at PwC, who handled the liquidation, disclosed that Extra Energy Supply collapsed owing over £148 million to Extra Energie GmbH and Extra Energy Holding (Cyprus) Limited. The report also mentioned pending confirmation of total tax liabilities, particularly related to complex VAT transactions, with final figures expected in mid-2024.

Elizabeth Pigney, chief investigator for the Insolvency Service, emphasized Ben-Moshe's disregard for energy market regulations, causing distress to customers. Pigney stated, "This is not acceptable behavior for any company director, and as a result, he cannot be involved in the promotion, formation, or management of a company in the UK for six years."

The collapse of Extra Energy Supply occurred before the surge in energy prices that led to the downfall of over 30 small energy providers, necessitating taxpayer bailouts. Cathryn Scott, regulatory director for Ofgem, highlighted the regulator's commitment to consumer protection, stating, "Ofgem has supported the Insolvency Service to bar this director from the industry, which sends a strong message that this kind of behavior will not be tolerated."

The six-year ban on Ben-Moshe, effective from November 15, 2023, prohibits his involvement in the promotion, formation, or management of a company without court permission.

Builder jailed for £600k fraud

A Suffolk builder, Alan Middleton, has been sentenced to four years in prison for multiple offenses, including overcharging clients, failing to complete jobs, and committing a £170,000 VAT fraud. Middleton, originally from Saxmundham, funded an extravagant lifestyle with the stolen funds, including trips to Gibraltar and the Italian Grand Prix, frequent visits to London for shopping sprees, and sending staff members on overseas trips. His actions led to the dissolution of five companies he operated under, including K Builders, G & K Builders, Middleton Building Services, AGM Custom Construction, and AGM Bespoke Construction Limited.

Middleton, found guilty of five counts of fraud, obtained £592,000 from unsuspecting clients, leaving jobs incomplete and of substandard quality. Wood Green Crown Court in London handed down the four-year sentence and a five-year disqualification from acting as a director.

Suffolk Trading Standards initiated the investigation after clients reported paying upfront for unfinished building work. Middleton, trading under forged Federation of Master Builders insurance documents, deceived clients into believing he was insured and qualified. Despite not being VAT-registered, he falsified invoices, claiming £170,000 in VAT.

Graham Crisp, head of Suffolk Trading Standards, described Middleton as a "greedy man" who exploited customers, many of whom used life savings or loans for their dream homes. Middleton's unscrupulous practices included forging insurance documents, falsely claiming building control was unnecessary, and endangering lives.

Middleton admitted to multiple offenses, including five counts of fraud by false representation, theft, an Insolvency Act violation for obtaining payments over £500 while an undischarged bankrupt, and a Company Directors Disqualification Act violation for establishing a limited company as a bankrupt. Additionally, he and his partner committed mortgage fraud by misrepresenting their relationship.

Due to his poor credit rating, Mrs. Middleton claimed a salary of £108,000 to secure a mortgage. She received a suspended nine-month sentence for mortgage fraud and was ordered to pay a victim surcharge of £140.

Councillor Andrew Reid at Suffolk County Council expressed hope that Middleton's sentencing provides justice for those exploited, emphasizing the trust he abused, causing financial and emotional distress to his victims.

£138k Eat Out to Help Out fraud

The proprietor of a Manchester hotel, Shahid Naseeb Ahmed, aged 42, has been sentenced to 40 months in jail for fabricating claims under the government's Eat Out to Help Out scheme. Ahmed attempted to falsely claim approximately £138,840 from both the Eat Out to Help Out Scheme and the Coronavirus Job Retention Scheme (CJRS), as was revealed following a HMRC tax investigation.

As the sole director of Merchants Hotel in Manchester between April 2020 and August 2021, Ahmed submitted multiple claims, falsely asserting £61,165 from Eat Out to Help Out and an additional £51,708 for furlough payments. HMRC, suspicious after payments totaling £112,873 were made, blocked further claims.

HMRC investigators, part of Operation Egon, revealed that Ahmed did not serve food in the hotel; the only "catering" provided was tea and coffee-making facilities in the hotel bedrooms. Despite this, Ahmed claimed for thousands of diners during the investigation period. Additionally, he submitted duplicate claims for two purportedly separate hotels—Merchants Hotel Ltd and Merchants MCR—when, in reality, there was only one hotel.

Ahmed further abused the Coronavirus Job Retention Scheme by falsely claiming for full-time staff who were part-time, misrepresenting their pay. He also inaccurately stated that the hotel remained closed for the entire claims period, whereas it had reopened for part of that time. Bank inquiries confirmed Ahmed as the sole recipient of the wrongly disbursed funds.

Arrested on October 20, 2021, and subsequently admitting to overclaiming on the job retention scheme and fabricating Eat Out to Help Out Scheme claims, Ahmed was sentenced at Manchester Crown Court on November 9, following a trial where he pleaded guilty to 25 counts of fraud.

Maqsood Khan, senior crown court prosecutor at CPS Mersey Cheshire’s fraud unit, commented on Ahmed's actions, stating, "Shahid Ahmed cynically took advantage of two government schemes designed to help businesses survive a national crisis. His fraud was systematic, deliberate, and planned, undermining the system and diverting money needed elsewhere."

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